In need of some advice on land clearing bussiness

[NathanielJeep1]

Hey yall,
I used to be on here a few years ago and I just haven't been around due to work and school. I am thinking of starting a land clearing/bush hogging business. I have some experience clearing land from when I worked on the farm for 3 years back in high school. My questions are what would I need to get started (besides obvious tractor, truck,and trailer)? Also where is the best lace to get financing for starting a business? Is this kind of business financially viable for a start-up business? Is it better to buy new or used equipment? What kind of costs, besides equipment purchase, is involved. Thanks in advance for any and all help.
Later,
Nathaniel

 

[RonR]

Nathan,

Lots of things to learn with a couple of them being KEY POINTS.

One of your first stops, even before looking at equipment, is to talk with several insurance people about buying liability insurance. I'm guessing at your age, you might not have too many assets, but it only takes one incident and your equipment would be "owned" by someone that your company injured.

Try not to think about hiring employees as it will add to your expense (Insurance, workers comp).

Different places have different quirks. I bought a Kubota CUT and one insurance company thought I was going to dig basements, so they didn't want to provide coverage.

Its also catch 22. Ins Co want you to be in biz for 5 yrs before they want to cover you..... So how do you start?

I'd talk with an insurance guy, and find a CPA that works with small biz people. He can steer you best.

If you get wrapped up in small biz loans, then you have more people to satisfy.

I'd also go search the market--how much work is there, what can you charge, and develop a biz plan to show that you can make some $$$$ for your efforts.

Is this part time or full time? Starting Part time makes it easier to get your feet wet. I'm older, but I'd get really nervous with a big wad of new equipment sitting in my lot and payments due at the end of the month........... You get my drift?

Just go into this with your eyes open and you can do ok.

Ron

 

[btolle]

I agree with RonR. I have been in business for myself for 25 years and have learned a thing or 2 along the way.

The first thing is you need to save up your money until you can start the business WITHOUT borrowed money. It will be tough enough to go out on your own and feed yourself but add a bunch of payments to that and you could be in big trouble.

As RonR said, consider going into it part time using used equipment that you can pay cash for. I will add to that, put every penny "profit" you make into the bank or back into more equipment for the business.

About loans: I was in for a rude awakening when I went in business for myself. The truth is banks only loan money to those who DON'T need it or professional athletes. The reason for the professional athletes remark is that one of the banks I tried to borrow $15,000 from had loaned $175K to a Dallas Cowboys football player with no collateral. I was willing to put up a $5,000 CD and some land that I owned as collateral and had excellent credit. They turned me down.

I had the last laugh though, the football player got in trouble with the IRS and didn't repay a dime. The bank later went belly-up and I suspect the loan officer found himself jobless. Served the SOB right.

The good news is that I survived without their money and they really did me a favor by not loaning me any money. They forced me to be innovative and work harder to be successful and when I finally started turning a profit they didn't get a dime of it.

BTW, the first 2 years I was in business I probably averaged 60 hours a week minimum. The second 2 years I changed businesses and worked from 7 AM until at least 7 PM and at least 4 nights a week until 9 PM. I took 2 days off each year, Thanksgiving and Christmas. Nope, no Sundays or any other days off, I'm talking 363 days a year.

I don't want to discourage you, but I do want you to have your eyes wide open about being in business for yourself. If you are not willing to work 60 hours a week or more for the first few years you need to keep your present job.

Bill Tolle

 

[Todd_C]

The others have given excellent advice. I am in my early thirties and have considered doing the same as you. I have a full-time job that pays the bills and provides health insurance. I helped a co-worker with his business and continue to work with him. His primary goal for the first year was to break even. Nothing was purchased on credit. As profits grew, the money was invested back into the company to continue more growth. Three years later, my friend now has two part-time employees and more business requests than he can manage. He is now at a point he could quit his job and start working for himself. He maintains his current job because of retirement and health insurance.

Working for someone else at first will allow you to make contacts, obtain cash flow, and provide insurance until your part-time business takes off. I have people asking me everyday to do work for them with my tractor, so I am considering starting my own seperate part-time business. I'm going to start small and let word of mouth provide my customer base. If the business is a loss then I will have some tax relief. My goal at first will be to obtain all of the equipement needed then make a profit. When I am close to retirement (14 more years) my business should be strong enough to supplement my income. My main concern about working full-time in my own business is the cost of health insurance and the lack of worker's compensation; therefore, I do not plan on quiting my present job.

 

[frank_f15]

is this going to be a full time business? or a part time business? either way i would tell you to get INSURANCE. SOME of the other guys have already given good advise, but i will just add, that honest hard work for little profit may be in the offing for the first few years.

 

[NathanielJeep1]

Thanks for the great advice yall. I am planning on only doing this part time till I finish my AA in business managment. I have a small nest egg (3-4k) that I have saved up over the years and I am about to get around 2k as a settlement from the shop my truck was at when it got broken into(long story). So I figure I can take that 6k and get a decent used tractor and some implements, and sell my 03 Ranger (look for ad soon /forums/images/graemlins/wink.gif) and buy a 95-97 F-350 and a trailer because they go for around 7.5k or so around here and I figure a good 5th wheel will cost me about 4-5k. I will hopefully be able to buy those in cash depending on how much I can get for my ranger. And I really don't plan on turning a profit for awhile, untill I get my name known, I do have an advantage that my dad is vice-president of a GC and I could probablly get some business through them./forums/images/graemlins/cool.gif I am used to workin 60 hour weeks from survying during the summer so that is no problem. Does that sound like a fessable business plan? I will check into the insurence on monday, since I don't believe most insurence places are open on weekends. Again, thanks for all the help.

 

[avclay]

Nate,
Sounds like your willing to lay down alot of cash, borrowed or otherwise, to start a small business. First step for me would be to find your market. If your already in with a GC that will give you work, thats great. Make sure you do a informal "market study" and ID what they really need, brush hoggin, box scraping, or trees felled and lots leveled. GCs are usually looking for that later which needs more equipment than 5-6K will get you. Sounds like you may be looking to get "clean up jobs" which would be more along the lines of getting a site ready for grass (landscape rake, box scrapper, harley rake).
Next, have realistic scheduling goals. Remember, alot of this work is based on the weather and daylight. GCs always want everything done yesterday, so, if you get three days rain you better be ready to work of the fourth or fifth day, even if you have classes, finals, or your real job to get to.
Honestly, if my dad was VP for a good size GC I'd see if he couldn't get me a job as a shovel man for the big equipment and start picking up how to operate a bulldozer, excavator, or whatever else. Or helping the plumber or electrician, etc. etc. Whatever you choose you should develope a skill base to fall back on before branching out on your own. Not the most glamorous job in the world but you get to learn on someone elses equipment, gain experience from others, and get paid for it instead or worrying about turning a profit or making payments on equipment.

 

[JoeR]

Nate,

There is one more thing about being in business for yourself. You need to have the stomach for it. When I had my own business, 60 hours was a slow week. Every year before Christmas, I would have thousands in receivables and nothing in the bank. I would send invoices early in October, and I didn't get paid till January. The worst part, is it was the big customers who gave me a ton of work that were slow to pay. Of course, my bills has to be paid, and I had to wait on others to pay me. Very stressfull situation. Not having healthcare and a family was another matter... I have a great deal of respect for people who have their own business, but I also remember the stress and hours I put into it. Now I work for a large company, and I know my paycheck will be in the bank... I put up with more B.S., but I leave at 5PM and get paid on time.

Good luck, and learn as much as possible.

Joe

 

[texastomtom]

Some good points there,,,

Personally for this type work I would say DO NOT even consider charge accounts. Insist on payment when job is done. Make it a policy without exception.

You would not believe how many people go broke starting a business due to cash flow / receivables.

Even good accounts that are slow can kill you.

If they do not have the money to pay when the job is done, someone else does !

If you insist on allowing acccounts receivable make them fill out a credit application, do a credit check, and make sure you have the interest and late payment information on your forms so that you can legally charge them interest and late fee's.
Charge the max interest and late fee's to discourage them riding you.

I really wouldnt do charge accounts at all for this type of work.....

be carefull


and good luck

If you get a good cpa, he will help you with all the tax forms, sales tax, income tax reserves, property tax reserves, etc etc and should be able to advise you some on insurance and planning the whole package.

Do not forget the business plan
in detail
Remember that everything costs something and will affect the bottom line.

 

[gabby]

I've been there and got out. Worked my rear off and had very little to show for it. The overhead will bite you in the behind unmercifully. Things like insurance, depreciation, phone, repairs, road and desk time spent getting work, etc. You don't want to have any employees but you can't get enough work done by yourself to finish quickly and collect, so you're between a rock and a hard place.

Be very careful. It's much easier to lose money than it is to make money.
Gabby